Kiwibank has declared a profit of $13.9 million after tax for the six months ended December 31, a 41% drop from its $23.5 million profit for the same period in 2009.

New Kiwibank chief executive Paul Brock described the result as having “a strong underlying performance impacted by the inevitable effects of the global financial crisis that has resulted in increased provision for bad debts”.

The bank has increased provisions for bad debts from $19.5m to $45.5m, a 133% increase.

In the six months to December 31 total lending (home loans, business banking and credit cards) increased 5% from $10.4 billion to $10.9 billion.

Retail deposits increased 10% from $6.9 billion to $7.6 billion

Total income for the period was up $15 million to $169 million (9.9%) and operating expenses were up $7 million to $118 million (6.6%).

Net-interest-income has increased from $66.3m to $89.3m (1.19% to 1.42% of total assets), the increase being driven mainly by the higher margin variable loans compared to fixed loans.

Mr Brock said the bad debts were largely from unsuccessful business investments and very few involved domestic home owners.

Mr Brock said the level of at-risk loans remained very small compared with the total lending portfolio and reflects falling value of certain classes of property collateral and remains modest when compared with other banks.

Mr Brock said there had been many positive developments during the last six months including the launch of the bank’s own Kiwisaver scheme and the Notice Saver investment product, that has attracted more than half a billion dollars in less than six months.

Mr Brock said the outlook for continued growth of the bank was very positive. “After nearly nine years we are continuing to build market share; continuing to build our loan and deposit portfolios and most importantly continuing to make a positive impact on the New Zealand banking sector.”

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14 Comments & Questions

They have some interesting credit policies: I was rejected for a credit card with a $500 limit because I am a student on part time income, despite having $20k in NZX/ASX shares and $10k in accounts with Kiwibank (though not for much longer).

It is customary, for the New Boss, specially in a Bank, to jack up to the max the bad debt provisions.
It is called "cleaning the skeletons in the cupboards".
It is usually a prelude to a next exceptional quarter, the New Boss can take ownership of.
Old game, old tricks, old school.
In this case it may even have a compounded effect. I have analysed the results of the other (Aussie) banks, and they have made a good chunk of them writing back up bad debt provisions, and not lending more. Going countertrend may make the next set of numbers even far more attractive compared to rivals.
If "No Time" suggestion would ever be implemented, there will be a long queue of suitors, a very long one. They may end up fighting to buy it. That will immediately arise the question of why on heaven selling it.
You sell non performing assets when the cash proceeds can be put back to work at higher returns. In a world in which the NZ Govt , thanks to the US Fed and ECB, can borrow at near zero and get returned checks from Kiwi Bank and the Utilities around 15 to 20% of the valuations of sale, the economic reasons to sell should be backed by stronger numbers than the ones that case is resting upon.
In that, I think that borrowing from Govt. to fund current expenditure should be heavily curtailed and cut.
But to seel those particular assets now doesn't seem the cleverest idea that can be pursued.

Only problem in your analysis is that NZ borrows in NZ$, not US$, and the banks "helping " the Reserve Bank are charging for taking the currency risk and country risk, making a nice profit, plus they know in advance how much borrowing is coming through the books, even better opportunities to make nice profits.

Selling US$ or Euros and buying NZ$ to cover your currency risk , since NZ has the highest interest rate, has a positive carry, not a cost. You are PAID a premium, you do not pay one. On a very long term analysis, from 1992 onward, being hedged 100% in NZ$ against a basket of world currencies, had a benefit of 3.82% premium annualized. The country risk, in the case of New Zealand is considered low, and the ratings of the country just imply a modest , few basis points premium on the LIBOR rates. In that overall advantageous situation, you can even afford an extra cost for a swap to fix your rate and still come out well on top.
When making an economic consideration on a specific case, knowledge of the conditions helps to skip erroneous common beliefs, Chinese whispers or all this disinformed pitfalls that may occur talking by having heard confused concepts.
And yours was at least an attempt to make an economic consideration, because all the other comments are just political hatred that will not consider sound economic consideration and shoot in a foot of the taxpayers (us, collectively..) only to displease Mr Anderton, Cullen, Clarke etc. and please Mr Key/English etc.
Economic policy is a serious thing, political hatred and stupidity should be banned by the discussion in the general interest.

Another taxpayer funded socialist piece of garbage foisted on the taxpayer by Clark and Cullen, to secure Anderton's vote in Parliament - just like Working for Families and interest free loans for students.